Fast-food strike could backfire, U of L professor says

Fast food workers in more than 50 cities are expected to walk off the job tomorrow as they continue to protest for higher wages. But a local economics professor said there likely would be consequences for the rest of the economy — and the workers — if fast food wages go up.

“You can think about it from the fast food restaurants' perspective,” said Stephan F. Gohmann, the BB&T professor of free enterprise and professor of economics in the College of Business at the University of Louisville. “They may cut back on employment and raise prices. As a consequence, the price of fast food will go up, which means if people are spending more on fast food, there’s less to spend elsewhere.”

This summer, the demand for higher wages for fast food workers has increased.

“These jobs are now the jobs that are available to people who lost good, middle-class jobs before the recession and are trying to make ends meet,” Henry said on the show.

And the New York Times said in an editorial on the situation, “At some point, as strikes continue, well-paid executives in low-wage industries will have to confront the fact that low worker pay is at odds with their companies’ upbeat corporate images and their self-images as top executives.”

Among the companies the New York Times referred to is Louisville-based fast food giant Yum! Brands Inc. (NYSE: YUM). Its CEO, David Novak, earned $14.1 million in 2012 and $20.4 million in 2011, according to the company’s filing with U.S. Securities and Exchange Commission. KFC Corp., a division of KFC has been a target of the protests.

Gohmann said among the few consequences large companies might be afraid of is a federal mandate to raise the minimum wage. Overall, he said the fast food workers must be careful. If companies choose to pay employees more, they also might cuts jobs to control costs.

“It’s easy to get riled up and say ‘let’s go for this,’ ” Gohmann said. “But they really need to think about the potential long-term consequence.”